Emerson CEO blasts government, says firm will expand overseas

[audtatious]

I'm sure this is going to be the norm soon.....

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Emerson CEO David Farr said that the U.S. government was hurting manufacturers with regulation and taxes and that his company would continue to focus on growth overseas. "Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing," Farr said Wednesday in Chicago at a Baird Industrial Outlook conference. "Cap and trade, medical reform, labor rules."

St. Louis-based Emerson, the maker of electrical equipment and InSinkErator garbage disposals with $20.9 billion in sales for the year ended September, will keep expanding in emerging markets, which represented 32 percent of revenue in 2009. About 36 percent of manufacturing is now in "best-cost countries" up from 21 percent in 2003, according to slides accompanying his speech.

Companies will generate jobs in India and China, "places where people want the products and where the governments welcome you to actually do something," Farr said.

The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983. Emerson, which Farr said employed about 125,000 people worldwide, has eliminated more than 20,000 jobs since the end of 2008 to lower expenses.

"What do you think I am going to do?" Farr asked. "I'm not going to hire anybody in the United States. I'm moving. They are doing everything possible to destroy jobs."

"We as a company today are putting our best people, our best technology and our best investment in these marketplaces to grow," he said. "My job is to grow that top line, grow my earnings, grow my cash flow and grow my returns to the shareholders. My job is not to shrink and roll over for the U.S. government."

[seang]

Typical CEO philosophy...

[audtatious]

What's wrong with it? Shouldn't a company be able to make as much profit for themselves as legally possible?

[seang]

Well, I didn't actually say anything was "wrong" with it. All I said is that it is a typical CEO attitude. It is that way because if that CEO didn't fulfill these conditions, he would not be the CEO.

It's what's good for the company, and the company (proprieter(s)) come first, the management comes second, and the workers come last. It has always been that way, and fundamentally, nothing has really changed.

There are soooo many people that someone has to be forsaken eventually if the company is to continue to increase profits (which is the sole priority of the CEO).

[smockers83]

It's what's good for the company, and the company (proprieter(s)) come first, the management comes second, and the workers come last. It has always been that way, and fundamentally, nothing has really changed.

Well, hold on just a sec there. If the company doesn't look to increase profits, what happens to it's workers? When the company no longer makes profits, eventually all of those workers are out of jobs. Is that not clear? What's good for the company is good for employees. Ultimately, everyone's job in a company is to increase profits. There isn't a job in a company that is looking to decrease profits. If you have a position like that in a company, your company is f'ed up.

I'm tired of this CEO/corporation against the people mentality/conspiracy. Two of the richest men in the world, who were/are CEOs of their own companies, now devote a lot of their time/money to giving back to people in need.

[audtatious]

The key to a companies longevity is profits (unless you are a bank, GM or Chrysler...then it's taxpayer money). Without profits, there is no company. Without the company, there are no direct nor indirect jobs associated with it. It is up to the company to determine their direction, whether it's succeed or fail. Success = growth = more jobs. Failure = closed = hopefully replaced by a company that can succeed. In the case of a publicly traded company, the CEO helps steer the company and reports to the board of directors. The board hires someone whom they think will be successful at growing the company. It is up to the board of directors to determine how much money that CEO is worth. It is NOT the Gov's job to determine what companies can pay their CEO. It is also not the Gov's job to penalize companies in order to "spread the wealth" in order to pay for their own pet projects. This is directly causing issues with growth and jobs. The Gov needs to GTFO.

[Cold_Zero]

What's good for the company is good for employees. Ultimately, everyone's job in a company is to increase profits.

And what is bad for the company is bad for the employees. I work for a Fortune 500 company and we have had problems with federal regulations (2007 and upcoming) and were hit hard by the Liquidity Crisis. My stock options are worth (total) $17.50, my benefits have been slashed, we have not gotten even a cost of living pay raise in years and we have been asked to more with less after 3 waves of severances. Not to mention the morale of the company has been down since August 2007.

Quote »I'm tired of this CEO/corporation against the people mentality/conspiracy. Two of the richest men in the world, who were/are CEOs of their own companies, now devote a lot of their time/money to giving back to people in need.[/quote]Not to mention that they employ people that pay taxes, the corporations (at least in our case) pay taxes and provide valuable services at competitive prices that a lot of other companies can not do. But hey, we are just an evil corporation.

[srellim234]

... In the case of a publicly traded company, the CEO helps steer the company and reports to the board of directors. The board hires someone whom they think will be successful at growing the company. It is up to the board of directors to determine how much money that CEO is worth. It is NOT the Gov's job to determine what companies can pay their CEO. It is also not the Gov's job to penalize companies in order to "spread the wealth" in order to pay for their own pet projects. This is directly causing issues with growth and jobs. The Gov needs to GTFO.

I agree with most of this but unfortunately there is another factor that is being totally overlooked. Pure and simple unregulated greed has gotten us where we are.

Take a look at the boards of directors of all these corporations we are talking about. They are now a "good old boys' network", with board members sitting on multiple boards and also pulling down full time compensation from each one of them. Hatchet men move from company to company at their behest, slashing and burning for short term profits and then many of them move on.

As a shareholder I do not vote for any board member that sits on more than one board. They are not really working for me as an investor if they have divided loyalties and responsibilities to more than one company.

I also vote against anyone on a compensation board at a company that offers stock options. If the employee (CEO, manager or rank and file member) has performed in a measurable manner to deserve a bonus, then give them the cash. You'd see a lot less in the way of these outrageous bonuses if the company were handing out something tangible like cold, hard cash instead of the abstract options. Options don't bother the boards and CEOs because they get them from multiple companies. If one "tanks", they have others to fall back on. For their employees, however, they only have the one company with their options and when the management ravages it for short term profits the rest of the employees are left holding the empty bag.

Home Depot is a perfect example of how the CEO and baord can ravage a company and leave with their millions and screw everyone else. That company still hasn't recovered from what happened.

I put the blame on the big shareholders' greed for short term profit, and that includes retirement funds that invest short term and skew the votes. They have no interest whatsoever in the long term health of a company and they vote their millions of shares accordingly. Boards and company officers likewise sit on tons of shares and vote for their own wallets instead of their fellow employees' long term prospects. Employees with only a few thousand shares have absolutely no chance of affecting the vote and the system keeps sustaining itself at the little guys' expense.

[audtatious]

In the case of Home Depot, they deserve what they get. Should there be some regulation? Probably...I just don't know enough about it to determine what regulation would be constitutional. As a share holder you can always sell your shares so it's not like you are trapped.

In cases like Home Depot, what is the norm and what is the exception? If you asked "Joe Public" their opinion, based on news, then all CEO's and companies are corrupt and that is far from the truth.

[srellim234]

I agree. For most publicly traded companies the people involved are honorable and decent people. Unfortunately it's the bad ones that get all the publicity.

The gradual erosion of regulation over multiple administrations led to the banking crisis. The combination of corporate greed, consumer greed and politicians' greed for votes is what caused the whole thing.

A return to a decent regulatory system that allows for decent profits along with compensatory regulation that requires compensation to be limited to immediate rather than deferred would be a good start. I'd love to watch a debate on limiting the number of boards an individual could sit on, too. As I pointed out, the majority of shareholders do not have enough clout to offset the millions of shares the board and execs have in a company to effect that type of change.

It would be nice if corporate compensation boards would limit pay to execs, maybe limiting the highest paid person in the corporation to something like 15X (including any bonus) what the lowest paid full-time employee in the company makes, but that is absolutely NOT the government's call.

Reinstating usury laws and applying them to the banking industry would be a good thing, too. It would make getting that credit card a little tougher if the bank couldn't arbitrarily decide to change your account to over 30% interest whenever they feel like it. And, yes, they ARE doing it. They did it to us when the mail delivered our payment two days late (it was postmarked 5 days before it was due) and they refused to change the interest rate back. Needless to say, we paid it off and will no longer deal with that bank.
Modified by srellim234 at 11:36 AM 11/13/2009

[audtatious]

The gradual erosion of regulation over multiple administrations led to the banking crisis. The combination of corporate greed, consumer greed and politicians' greed for votes is what caused the whole thing.

I disagree that lack of regulation caused the banking crisis. The majority of banking issues today is due to home mortgage loans, along with some greed. Barney Frank and gang pushed for more home loans to those who could not afford them and even penalized banks for not participating. How many times have we seen the vids of Frank and other dem politicians, as late as early '08, stating there is no financial problem with mortgages and Fannie/Freddie? This was totally false. The outcome is the problems we have now. While it was going on, more than just banks were making buck as the housing industry was making tons of cash. From real estate brokers to home builders.

A return to a decent regulatory system that allows for decent profits along with compensatory regulation that requires compensation to be limited to immediate rather than deferred would be a good start. I'd love to watch a debate on limiting the number of boards an individual could sit on, too. As I pointed out, the majority of shareholders do not have enough clout to offset the millions of shares the board and execs have in a company to effect that type of change.

Allowing banks to make loans based upon credit history and repayment, while making them responsible for their choices, is the proper direction. It's going to take years for all this to work through the system. Unfortunately we already have Frank calling for banks to start making more of these loans.

It would be nice if corporate compensation boards would limit pay to execs, maybe limiting the highest paid person in the corporation to something like 15X (including any bonus) what the lowest paid full-time employee in the company makes, but that is absolutely NOT the government's call.

I agree, but that is still up to the corporation. Jobs are worth what companies will pay and the value of a job to an individual is whether they are willing to perform the work at the stated salary. Right now it's tough due to the high unemployment percentages which limits the number of jobs available to those looking for work. Once everything works itself out the need for employees to work a set job will drive the pay scale. In a free market it's up to a company to offer a position at set pay while it is also free for individuals to take that job or go somewhere else where there is more pay.

Reinstating usury laws and applying them to the banking industry would be a good thing, too. It would make getting that credit card a little tougher if the bank couldn't arbitrarily decide to change your account to over 30% interest whenever they feel like it. And, yes, they ARE doing it. They did it to us when the mail delivered our payment two days late (it was postmarked 5 days before it was due) and they refused to change the interest rate back. Needless to say, we paid it off and will no longer deal with that bank.

Randomly changing APR on cards and such is BS. I do agree there should be some rules out to protect the consumer (other than reading the micro-fonted agreement). Same goes for excessive overdraft fees and the ways a bank can change the order of when checks clear to cause higher revenue due to overdrafts.

[srellim234]

You're right about forcing the banks to be responsible. A simple solution would be the elimination of reselling loans, individually or in packages. You give a loan, it's yours for for the life of the loan. Cars, houses, it doesn't matter. The % interest on that loan is what your business has to operate with for that many years. That's your gross profit and you may not discount it and pass it on to someone else. Any default on a loan you made will be against YOU, not the poor schmuck you passed it to.

No more shell games with the money in the loan industry.

[smockers83]

I agree with most of this but unfortunately there is another factor that is being totally overlooked. Pure and simple unregulated greed has gotten us where we are.

Warren Buffet said last night that we talk about greed like it was invented a few years ago. Greed will always be there. You will never get rid of it.

As a shareholder I do not vote for any board member that sits on more than one board. They are not really working for me as an investor if they have divided loyalties and responsibilities to more than one company.

Yes and no. People sitting on different boards can bring best practices from one company to another. It's not like the board has a full-time job at the company anyway. Currently, my company is benefiting from someone who sits on another board.

[seang]

I'm really glad to be able to talk about this stuff with people who I feel are smarter/more seasoned than me in this area, and I am truly heeding much of this.

It is refreshing to know that there are CEO's who aren't evil jerks out to deprive people of every penny they have, things are tough enough already without that kind of behavior.

One question though, and this has to do with CEO salaries. Greed aside, is a CEO actually that good to demand a freakishly large compensation? I mean, look how many other people there are. How can somebody be that much more prodigious than everyone else? I don't fully understand that level of exclusivity, or maybe I'm just being ignorant.
Modified by seang at 6:04 PM 11/13/2009

[srellim234]

smockers- there may be a benefit to sitting on one or two boards, but not when someone sits on five or six boards and accepts the equivalent of full-time compensation (calculate options into their compensation) for what you admit is part time work. Plus, many have what are full time jobs at full pay as executives for still another corporation.

I fault the board members sitting on compensation panels for perpetuating this. If they were really all bringing best business practices from other corporations that would be great, but for too many of them they just walk in and "rubber stamp" whatever the management wants. They scratch each others' backs and keep it going.

Divided loyalties and attention deserve divided compensation.

[audtatious]

You're right about forcing the banks to be responsible. A simple solution would be the elimination of reselling loans, individually or in packages. You give a loan, it's yours for for the life of the loan. Cars, houses, it doesn't matter. The % interest on that loan is what your business has to operate with for that many years. That's your gross profit and you may not discount it and pass it on to someone else. Any default on a loan you made will be against YOU, not the poor schmuck you passed it to.

No more shell games with the money in the loan industry.

+1000

I highly agree with this.

[audtatious]

One question though, and this has to do with CEO salaries. Greed aside, is a CEO actually that good to demand a freakishly large compensation? I mean, look how many other people there are. How can somebody be that much more prodigious than everyone else? I don't fully understand that level of exclusivity, or maybe I'm just being ignorant.

Good question and I don't have an answer other than "you are only as valuable as what people are willing to pay". Some of these guys are smart a hell, others, not so much. Basing compensation on company growth would be a more viable choice when hiring CEO's as I do find it insane to pay these guys a golden parachute even if they run a company into the ground.

[seang]

Some of these guys are smart a hell

I was thinking that, too, but I wanted to hear it from somebody else.

[audtatious]

I don't have the answers as I'm still trying to grasp the situation myself. What I am tired of is the whole "punish the many due to the actions of the few" approach that seems predominant in today's society. At this point, the Gov is simply trying to stick too many of their fingers in the till in order to have more control over corporations, states and people in general. That is NOT what our founding fathers had in mind for this country and it's gotta stop.

[smockers83]

I'd like to say one more thing on greed.

I don't know about other people, but my idea of greed in terms of a CEO is a CEO who wants to suck every penny he can get from the consumer. A business that is ran that way, probably in theory, will have higher prices than it's competition.

But that's going on a tangent already. My point I wanted to make is that there is a difference between greed and being delusional. Someone who's been in a business for a long time and has seen nothing more than good years for a long time can become delusional about the market, not necessarily greedy. I think being delusional has been more of a factor than greed.

[Urabus GodofTraction]

It's what's good for the company, and the company (proprieter(s)) come first, the management comes second, and the workers come last. It has always been that way, and fundamentally, nothing has really changed.

You, of course, don't actually mean workers, because if you did, you'd realize that the Indians or whomever will be employed when manufacturing moves overseas are workers as well.

And of course the company comes first. If it didn't, it wouldn't be a company, it would be a union and useless to everyone.

[seang]

Indians or whomever will be employed when manufacturing moves overseas are workers as well.

Good for them
Modified by seang at 12:09 PM 11/15/2009

[Urabus GodofTraction]

Good for them

Modified by seang at 12:09 PM 11/15/2009

They took ouur jerbs!

[seang]

^^Yup, now they can afford to modify their Tata Nano's...

[audtatious]

We know that companies will move manufacturing and such overseas if they cannot make a profit here in the US. That being the case, why is the Gov continually penalizing companies via taxation, knowing that it will lower the number of US jobs, and then deflect the blame on the companies for doing exactly what was expected?

[seang]

IDK, maybe to make the government look good in the eyes of the unenjoyed?

Here's a quick question, are lower taxes actually gonna change anything at this point?
Modified by seang at 10:48 PM 11/17/2009

[audtatious]

Good question. Right now, the Gov has so much debt they are piling on they have to try and get some of it paid back. Who pays taxes? Corporations and citizens. Tax the rich, tax companies. The more companies and corporations are punished to pay for Gov initiatives, the less they will expand here in the US which means less jobs. With less jobs, the middle class continues to shrink until the vast majority solely rely on the Gov for their existence. Only the "rich" and the Gov will have money.

Bush showed that lowering taxes can increase Gov revenues. Unfortunately, the GOP were free-spending and didn't cut budgets/were not fiscally conservative. Thus, debt started getting out of hand. Obama has doubled down and is looking at other ways to pay for his "vision" which may even include another stimulus even thought the stimulus from the past has not shown to have been successful.

How about the current Admin drop the UH crap, Cap & Trade initiative, and more stimulus money while cutting deficit spending and get rid of Gov waste? Give corporations a tax incentive to grow jobs here. It's a start.

[smockers83]

How about the current Admin drop the UH crap, Cap & Trade initiative, and more stimulus money while cutting deficit spending and get rid of Gov waste?

But don't you remember when Obama called for the departments to cut $100 million* between them?

*or whatever the number was (it was small)

[audtatious]

What about the 500 billion in waste that they say they can cut but won't do it unless UH passes......

[srellim234]

Good question. Right now, the Gov has so much debt they are piling on they have to try and get some of it paid back. Who pays taxes? Corporations and citizens.

Wrong. Corporations do not pay taxes. People pay taxes. Corporations calculate taxes as a part of business expense and pass it on to their customers. If their customers are also corporations, those customers pass it along again. It still comes down to a person at the end of the line paying the taxes, not the corporation.

Step 1. A balanced budget amendment with nothing allowed to be "off-budget."

Step 2. We should calculate how much our government costs, eliminate ALL taxes and change the system to a flat rate income tax on individuals with no deductions whatsoever.

People would see how much their gov't is really costing them, corporations would have a reason to stay here, and with those jobs the gov't would take in a lot more in income taxes. The reason it will never happen is that the powers in Washington have no desire to let anyone know how expensive and wasteful they really are. Not to mention the fact that they would then have to justify each increase they take out of our paychecks because it would be highly visible.

Each worker would also know how much they are going to make with that extra hour of overtime as opposed to the system we have now which penalizes individuals for having initiative and trying to get ahead.